The document provides recommendations to improve the real estate industry in India. It notes that the industry is currently under debt with high inventory levels. It suggests increasing productivity through improved project monitoring to reduce overheads from 40% to 20% without cutting jobs. Other recommendations include expediting new launches, using alternative materials, implementing project cost accounting, and establishing an annual business plan with departmental targets. The document advocates for changes to modernize operations and improve affordability, sustainability, and profitability in the real estate sector.

1. Ideas for today and tomorrow
Being the best in
Real Estate
Development

2. • To make Real Estate one of the most respected industry sectors
• To make Real Estate one of the most profitable industry sectors
• To make Real Estate an evergreen industry
• To make Real Estate an efficient and transparent industry
• To make Real Estate more affordable year on year
• To bring unique Innovations in the industry – innovative sales,
innovative designs, innovative constructions
Vision Statement

3. • Transform the design and materials (materials that use less of water, less
of sand, less of cement, less of steel)
• Transform the construction method and technology (need to bring down
overheads from 40% to 10% - by increasing productivity, no reduction of
manpower)
• Transform the sale process (focus on GTM, and leverage e-platforms)
• Transform Project Costing, Monitoring & Control Processes
Goal and Objective

4. What's happening?
2005 2010 2015
1000
2000
3000
4000
Cost
Price
Salary/
Affordability
Not
buying
Buying
5000

5. • Today, the real estate sector is under debt with the debt crossing the
annual revenue. Sales are down, inventory is at all time high, and PAT is
going down.
• Delhi has almost 4.5 yrs of inventory, Mumbai has 3.5 yrs, Chennai and
Bangalore have about 1.5 yrs of inventory.
• Many projects are starved of cash, and completion schedules have
overshot.
• Response getting better only for compact units. Premium segment is still
not responding. Deep discounts upto 30% have been given by some
developers under stress.
• Real Estate Regulatory Bill has come out with tough measures,
increasing the potential liability of developers. Customers gain strong
position.
Today’s Situation

6. • Change in market – From a builder’s market in 2005, it has flipped to buyer’s market now.
The price is no more in control of developers.
• Increasing Input Prices – Input material costs have gone up drastically in last 5 to 7 years.
Cement, Sand, Steel, Aggregate, Tiles costs almost doubled in this duration. Labour and
water have become scarce and costly.
• Slowing Down New Launches – Many realtors stop launches during lean time and hence
run out of cash cows.
• Pre-loaded Payment Plans – About 95% of cash is collected by the time project reaches 50%
completion. This excess money is diverted elsewhere (in land etc) resulting in cash
drought during second half of the project, often going for debt funding. Hence, the debt
kept on rising.
• Lower productivity - Lower efficiency of project execution (slow completion of projects)
means the overhead per unit of output goes up. Real Estate Industry in India has high
overheads of 40% to 50% incl. S&M). Other similar industries have about 20%. As the input
prices have spiraled up, and the salaries have not gone up, the price is not moving
northwards. Hence the margins are squeezed to bare minimum.
• Not much of Innovation in Design, Construction or Sales
How Did We Get Here?

7. • Buyers can demand compensation for delays in delivery.
• Developers may have to pay 11.2% interest to buyers. (2% above Prime
Lending Rate).
• Carpet Area defined as one including internal walls and excluding
external walls – a not so common definition in business which can
create confusion
• New norms for starting sells – should one build and sell ? (similar to
commercial properties)
Now the Add On - Real Estate Regulatory Act

8. • Available options –
• Reduce overheads to 20% of construction cost
• Innovate in Sale & Pricing Strategies
• Bring down the cost of construction by 50%,
• Overhead cannot be reduced without change in construction method. It
is tied to technology and method of construction.
• Pricing strategies of deep discounts and deferred collections are not
sustainable solutions. They eat into margins.
• Cost of construction cannot be reduced beyond 5%-10% without
changing the materials used in construction of the product. 5%-10% us
not enough to solve the problem.
Available Options

9. • Increase Productivity – Institute monthly Integrated Project Review by
Management. A central review covering progress, contracts, design,
drawings, materials, labour and risks. Can double the productivity within
two years.
• Benefit – As the productivity doubles, overhead becomes half without
reducing manpower. Saving of ~Rs 400/sft of saleable area.
• Key activities:
• Set up the framework and structure of reporting project progress
• An initial training to all Project Managers on Project Management & Reporting
(PMI)
• Monthly collection of data, preparation of reports & validation
• Conduct review meeting with top management, departments and PMs
• Capture actions items, follow up till closure.
Recommendation –
Increase Productivity

10. • Build Business Process Map – Conduct process mapping workshop
with sales/ marketing/ CRM, projects/ engineering/ contracts, land/ legal/
liaison & finance/ accounts.
• Map Problem Areas – Identify specific process areas which need de-
bottlenecking.
• Debottleneck Congestion Areas:
• Run the analysis through the top management, Get approval.
• Work with the respective departments to redraw process maps in congested
areas
• Run the redrawn process maps with the management
• Once approved implement and monitor the processes/ improvements
Recommendation –
Debottlenecking the Organization

11. • Monthly New Launch Review by Management – New launches are the
most complicated and relatively less controlled processes in realtor
companies. It involves management, land, legal, architect, marketing,
projects, contracts and liaison – all independent departments to work
together to get a launch done. Hence a monthly review is required to
ensure timelines are met. The RERA bill makes it even more wanted than
ever.
• Plan Launches at Regular Intervals – New launches should be
scheduled at regular intervals irrespective of market sentiment. The size
of launch may vary though. This is critical for success of business &
regular cashflow.
Recommendation – Expedite New
Launch Plan

12. • Always Look for alternate materials – There needs to be a look out for
alternate materials of construction which can help reduce the cost & time
e.g. FRP/ GNF/ CFRP rebars, gypsum wall panels, curing less cement,
Etc. Use of wireless technology can reduce the wires and IP camera can
reduce the cost of traditional video doorbells and CCTV.
• Alternate should mostly be a natural material- The longevity of
alternate materials is important. Natural materials will last longer. FRP
boards and door panels have less life than wooden doors.
Recommendation – Use of Alternate
Materials/ New Technology

13. • EVM Based Project Progress – Many companies struggle to find the
exact progress of a project and cost-to-go. Earned Value based progress
and cost measurements are the most accurate and trusted practices
world-wide.
• Direct & Indirect Project Costs - In real estate projects, project based
costing and P&L is not so matured. The direct cost becomes the driver in
most of the cases. There is need for establishing a proper costing
framework so that the real cost per project can be measured and proper
profitability can be measured. It also helps manage cashflows for every
project.
Recommendation – Set up Project
Costing & Accounting Framework

14. • Framework for Calculation of P&L ProjectWise– Real Estate Projects
run for three to six years in India. Lot of these project are signed on JD
but may be on loss overall. However, such projects go undetected as
project-wise P&L is not done. Hence setting up a P&L calculation
framework will help monitor project health upfront.
• Development Management- Development Managers are P&L managers
for each project. This concept brings focus on project sales, efficiency,
cashflow, profitability and progress. Real Estate Companies need to
bring this concept soon.
Recommendation – Manage P&L
Project-wise

15. • Annual Business Plan – Real Estate Projects run for three to six years in
India. Due to this the practice of having an annual business plan is not
matured in realtor companies. Hence, the business decisions are driven
by market sentiments. A structured business plan approach will ensure
stability to business and alignment of all functions.
• Target Setting For Departments/ Projects- The annual business plan is
broken down into departmental and project targets. Each of these targets
are reviewed every month for achievement against the plan and catch up
measure put in place. This will bring alignment of functions and focus
towards the business goals of the rather than individual department
goals.
Recommendation – Annual Business
Plan & Target Setting

16. • Engineering –IIT Kanpur, Management – IIM Kolkata, PMP – PMI/ USA
• Design, Engineering, Construction of large projects in Steel Industry, Oil
& Gas Industry, IT Industry and Real Estate Industry
• Rs 800 cr worth of projects in Steel Industry, Rs 3600 cr worth of projects
in Oil & Gas, USD 700 million worth of work in IT industry, and Rs 2200
cr worth of work in Real Estate.
• Worked Across 17 Countries in the World. Well travelled and managed
multi-lingual, multi-cultural people.
• Managed design, projects, global business and P&L
• Based in Bangalore
About me

17. Thank You